Asian equity markets kicked off the week with a cautiously upbeat tone, driven largely by renewed hopes for progress in U.S.-China trade talks and a modestly positive return to trading in mainland China following holidays.

Chinese Equities Lead the Charge

The Shanghai Composite climbed 0.8% and the CSI 300 gained 0.9% on Tuesday, as traders responded positively to comments from U.S. Treasury Secretary Scott Bessent, who hinted at imminent progress in U.S.-China negotiations. Hong Kong's Hang Seng Index followed suit, rising 0.5% amid light volumes due to regional holidays in Japan and South Korea.

The uptick follows remarks from both Washington and Beijing suggesting a softening of trade rhetoric. While former President Trump mentioned ongoing talks aimed at securing “fair deals,” China's Ministry of Commerce recently signaled a willingness to engage—albeit with conditions centered on tariff rollbacks and mutual respect.

Market Participants Eye Macro Data

Despite optimism on trade, a tempered tone persists among investors awaiting upcoming macroeconomic catalysts. China's Caixin Services PMI came in below expectations on Friday, casting some doubt on the strength of the recovery in the consumer and services segments.

Looking ahead, markets will focus on China's trade balance and consumer price index (CPI) data due Friday. These reports will provide more clarity on domestic demand trends and inflationary pressures in the world's second-largest economy—both key to judging whether Beijing will escalate stimulus efforts.

With regional volumes still suppressed due to holidays and the U.S. Fed meeting on the horizon, Asian equities remain delicately poised. Yet signs of de-escalation between the U.S. and China could continue to act as a tailwind for sentiment across emerging markets.